Equity Accounting

DEFINITION of 'Equity Accounting'

A method of accounting whereby a corporation will document a portion of the undistributed profits for an affiliated company in which they own a position.

BREAKING DOWN 'Equity Accounting'

The amount of undistributed profits that the corporation decides to document is generally equal to the percentage of equity it controls. In many cases, the profits of the affiliated company are never distributed to the corporation.

RELATED TERMS
  1. Affiliate

    A type of inter-company relationship in which one of the companies ...
  2. Affiliated Companies

    Companies that are less than 50% owned by a parent company; the ...
  3. Form 2439: Notice to Shareholder ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  4. Affiliated Person

    An individual who is in a position to influence the actions of ...
  5. Form 3

    A document that must be filed with the Securities and Exchange ...
  6. Affiliated Group

    Two or more corporations that are related through common ownership, ...
Related Articles
  1. Investing

    Explaining Affiliate, Associate And Subsidiary

    Affiliate, associate and subsidiary are all terms referring to the degree of ownership a parent company holds in another company.
  2. Personal Finance

    Explaining Corporate Tax

    A corporate tax is a tax levied on the profits a corporation generates.
  3. Financial Advisor

    Affiliated Managers Group: Investment Manager Highlight (AMG)

    Read about the multiaffiliate business model employed by Affiliated Managers Group, a global investment manager with $611 billion in assets under management.
  4. Markets

    What is Regulation W?

    Regulation W sets the terms for transactions between banks and their affiliates.
  5. Investing

    What is Profit?

    Profit is a general term used to denote when earnings exceed the expenses incurred to generate those earnings.
  6. Personal Finance

    Corporate Inversion: How It Works

    Large corporations are making all kinds of moves to decrease expenses and increase profits in an increasingly competitive global market.
  7. Markets

    Calculating Economic Profit

    Economic profit is the difference between the revenue a firm earns from sales and the firm’s total opportunity costs.
  8. Investing

    How Do Accountants Use the Equity Method?

    The equity method is an accounting technique used by firms to assess the profits earned by their investments in other companies.
  9. Investing

    What is Profit Before Tax?

    Profit before tax measures a company’s profits before it pays corporate income tax.
  10. Markets

    What is Capital Stock?

    Capital stock refers to the number of authorized shares a corporation may issue, both common and preferred.
RELATED FAQS
  1. How do companies like ClickBank help websites make money?

    Find out how sites such as ClickBank help websites make money by offering the opportunity for vendors and affiliates to promote ... Read Answer >>
  2. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Answer >>
  3. How does a company record profits using the equity method?

    Understand what the equity method of accounting is and what it's used for. Learn how a company record profits using the equity ... Read Answer >>
  4. What are the GAAP standards for digital document storage?

    According to Sarbanes Oxley Act (SOX), companies are required to keep all documents that contain information about a company's ... Read Answer >>
  5. Where can I find a company's stance on the environment?

    A company's stance on the environment is typically found in the company's statement on corporate sustainability. These statements ... Read Answer >>
  6. In what context is a corporation considered to be an individual entity?

    Read about when a corporation is considered an individual entity, when it is not and why corporations are not considered ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center